Monday, January 12, 2009

Tight real estate markets make it especially difficult to complete transactions in which each party needs to sell his own house before he can buy another. Michael Ostrovsky points me to a variety of house-swap plans that resemble kidney exchange in various ways, including combinations of two-way exchanges, and larger exchanges and chains.

"Both sides of a swap transaction typically close simultaneously -- taking away the risk of being saddled with two mortgages at once, or of having to borrow more after purchasing a new home because your old house didn't sell for as much as you thought it would. When swap partners meet directly online they also save on brokers' sales commissions -- usually 4% to 7% in most markets. If there are homes of unequal value, one buyer provides the cash or gets a mortgage to make up the difference experts say.Mr. Sawtelle found his swap via a $19.95 listing on OnlineHouseTrading.com, one of at least six swap sites started in the past year. Four have started in just the past seven months, including OnlineHouseTrading.com, GoSwap.org, DaytonaHomeTrader.com and DomuSwap.com. Together the six sites have roughly 16,000 postings. At Craigslist.org, the popular ad site, the number of "home swap" listings -- which includes people trading homes temporarily for vacation -- jumped 56%, to 7,392 in the 12 months ending in December, the company says, and much of the growth came from people trying to permanently sell each other their homes."

Note that even some of the simple game theory that leads to simultaneous kidney exchanges also leads to simultaneous house exchanges, despite the fact that it's perfectly legal to write contracts about the sale of houses.